Saturday, April 25, 2009

Demonstrating just how massive the ongoing quant (and market) dislocation is, the most recent performance numbers for Jim Simons monster RIEF fund, which is arguably one of the largest quant funds in the world with $100 billion in total capacity (comps being BGI, Getco and Highbridge, the last of which incidentally was responsible for the massive market spike on Thursday afternoon as it force-deleveraged through its owner JP Morgan), indicate that it is underperfoming the S&P by almost 17% Month To Date. One can only imagine what is going on at the internal-only Medallion Fund. The astrophysicists have failed. Hopefully not terminally, although as RIFF is also woefully below its benchmark, these may be dark times for secretive, chainsmoking Jim.

As Zero Hedge has warned, when it comes to quant funds, the performance distribution is not a simple zero sum: the market's very topology is held in place by a smoothly functioning quant sector. Its absence results in abnormal and outsized index gyrations, incidentally like the one experienced by the S&P500 in the last 5 minutes of trading on Friday.

It would be critical for the MSM to pick up on this topic, as the last time RIEF underperformed so poorly was the summer of 2007, which as everyone knows culminated with the global quant implosion in early August that year. The last thing the current jittery market needs right now is a repeat event of that scale.
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Demonstrating just how massive the ongoing quant (and market) dislocation is, the most recent performance numbers for Jim Simons monster RIEF fund, which is arguably one of the largest quant funds in the world with $100 billion in total capacity (comps being BGI, Getco and Highbridge, the last of which incidentally was responsible for the massive market spike on Thursday afternoon as it force-deleveraged through its owner JP Morgan), indicate that it is underperfoming the S&P by almost 17% Month To Date. One can only imagine what is going on at the internal-only Medallion Fund. The astrophysicists have failed. Hopefully not terminally, although as RIFF is also woefully below its benchmark, these may be dark times for secretive, chainsmoking Jim.

As Zero Hedge has warned, when it comes to quant funds, the performance distribution is not a simple zero sum: the market's very topology is held in place by a smoothly functioning quant sector. Its absence results in abnormal and outsized index gyrations, incidentally like the one experienced by the S&P500 in the last 5 minutes of trading on Friday.

It would be critical for the MSM to pick up on this topic, as the last time RIEF underperformed so poorly was the summer of 2007, which as everyone knows culminated with the global quant implosion in early August that year. The last thing the current jittery market needs right now is a repeat event of that scale.